Rock Actually Beats Paper
Tokenized Gold; A primer on the future of wealth preservation.
TLDR;
Gold was adopted as money to transfer value over time.
Fiat currency was created to transfer value over space.
Gold-backed digital currency does both and pays you to hold it.
Money
Money, in its most fundamental form, is a medium of exchange, a unit of account, and a store of value. It facilitates transactions, measures the value of goods and services, and should preserve wealth over time. Historically, money has taken various forms, from bartered goods and precious metals to paper currencies and digital assets. Each iteration aims to improve efficiency and stability in financial transactions.
Fiat Currency
Fiat currency is what we would today refer to as our “money”. Fiat, or unbacked currencies derive their value not from physical commodities like Gold or Silver but from government regulation, law and military presence. Essentially, fiat currency is a promise - the only reason it has any value is because a government says it does and people have faith in its stability. The US dollar, Canadian dollar, Euro, and Yen are all Fiat currencies. While fiat currencies are widely used and accepted, they are also subject to inflation and economic policies that erode their value over time. Governments are not inflating currencies into oblivion for no reason, though; they do it to inflate debts away and to incentivize growth - if spending makes more sense than saving, economies grow.
Gold as a currency
Gold has historically been seen as a superior form of money compared to fiat currencies for several reasons:
Intrinsic Value: Unlike fiat money, which relies on trust and government backing, Gold has intrinsic value across the entire world due to its unique physical properties and historical significance. It has been used as a form of wealth preservation for thousands of years.
Inflation & Instability Hedge: Gold is often viewed as a hedge against inflation and economic or political instability. Its value tends to remain relatively stable even when fiat currencies lose purchasing power. In fact, when fiat currencies and governments falter, Gold performs its best.
Limited Supply: The supply of Gold is finite, which helps maintain its value. There is only so much Gold in the ground, and we can only get it out of the ground so fast. By contrast, fiat currencies can be printed in unlimited amounts, at any time, without consensus.
Downsides of physical Gold
While Gold offers many benefits, it also has its drawbacks:
No Yield: Gold, when stored in a safe at home or in an allocated vault, does not generate interest or dividends, which can be a disadvantage for investors seeking income-generating assets.
Storage and Portability: Physical gold can be cumbersome to store and transport. Safeguarding gold requires secure vaults and can be inconvenient for transactions or investment diversification.
Transaction Complexity: Buying, selling, and transferring physical gold can be complex and involve significant transaction costs, making it less practical for everyday use.
Despite Gold’s few disadvantages, it remains leagues above fiat as a store of value simply because it actually holds value. It also can easily be integrated as part of a diversified investment portfolio to protect against uncertainty. Equities get their coverage as a vehicle by which to store and grow our purchasing power, so if owning Gold is equally as prudent and diversification is a no-brainer, why aren’t our banks, government and money managers reminding everyone to hold Gold? Why are we not taught to spend fiat and save Gold?
Money managers are reluctant to sell Gold to clients because Gold transactions come with lower commission fees (or no fees) compared to other investment products. As a result, financial advisors favour products with higher profit margins, like equities, even if they are less stable or secure.
It goes without saying that governments have kept this out of our school curriculum because Gold represents an exit from their ever-downward spiral of debasement which they have contrived to inflate debts away and incentivize economic growth. So, to be fair to them, why would they appreciate Gold’s ability to insulate people from their will? It’s only a natural enemy to government policy as it is a reference point that can’t be manipulated. I’m certainly not a fiat abolitionist, though. I hope most people do continue to operate inside the fiat system - we need them to pay that secret tax (inflation) to subsidize our collective economic growth.
Blockchain as a Financial Operating System
Blockchain is the solution to many of the inefficiencies, risks and evils associated with traditional financial systems. While aligning all participant’s incentives, it also provides a decentralized, transparent, and secure way to record transactions. Each transaction is verified by a network of computers, making it resistant to fraud and tampering. Blockchain can also streamline financial processes, reduce costs, and enhance the accessibility and security of transactions.
The Holy Grail: Gold on Blockchain
Digitized Gold on blockchain presents a disruptive but necessary evolutionary step in wealth management. Digital Gold, represented as tokens on a blockchain, combines the stability and intrinsic value of Gold with the efficiency and flexibility of transacting digitally. This fusion provides a solution to the traditional drawbacks of physical Gold:
Portability: Digital Gold can be easily and instantly transferred and traded globally, eliminating the need for physical storage and transportation. Currently, there exists friction when bringing Gold across international borders, however, with Gold on the blockchain, all that is required to move it anywhere is a private key.
Yield Generation: Platforms like Kinesis Money introduce mechanisms that allow Digital Gold to earn a yield, addressing the traditional lack of income generation. There are a few ways this is achieved, but generally, users and operators of blockchains are aligned with each other so revenue can be distributed evenly across an ecosystem to the benefit of all participants.
Transparency and Security: Blockchain ensures that each gold-backed token is verifiable and secure, providing greater transparency and reducing the risks associated with counterfeit or fraudulent transactions.
Kinesis Money: Portable Gold that Earns a Yield
Kinesis Money is one of the first movers in the Digital Gold space. They are not the only player, but they have a compelling offer. Leveraging blockchain technology, Kinesis offers a platform where users can hold, transfer, and transact with Gold and Silver digitally.
Users can access, manage and spend their Gold holdings from anywhere in the world without the logistical challenges of physical storage. There is also a Kinesis card that lets you directly spend from your precious metal holdings.
Through Kinesis, Digital Gold (represented as KAU tokens) and Digital Silver (represented as KAG tokens) can earn yields, offering a way to generate passive income while holding and saving these precious metals. This is accomplished by distributing a generous 57.5% of the platform transaction fees back to account holders. This means savers collect dividends, paid in Gold and Silver, generated by others interacting with the Kinesis ecosystem.
Kinesis stores your Gold in audited and insured vaults, with your name attached to it, and records all transactions on chain so your wealth is verifiably safe.
Kinesis Money represents a significant advancement in financial technology, merging the timeless value of Gold with the cutting-edge capabilities of blockchain. By doing so, it addresses the limitations of both physical Gold and fiat currencies, offering a more efficient, secure, and profitable way to manage and utilize precious metals in a turbulent modern financial landscape.
Storing wealth in an asset that appreciates over time, is accessible from anywhere, and generates income simply makes more sense than relying solely on one that steadily loses value and is controlled by a corrupt third party.
<3
Derek